Sirius loss narrows as subscriptions jump

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Sirius on Tuesday reported a lower fourth-quarter net loss, as the fee-based satellite radio operator prepared for a grilling by Congress that could determine the outcome of its $11.4bn effort to merge with XM.

Net losses narrowed to $245.6m, or 17 cents a share, from $311.4m, or 23 cents, the year before.

Total revenue jumped 142 per cent to $193.4m, driven by an 82 per cent rise in subscriptions, as costs of acquiring new customers fell 17 per cent to $121m.

Analysts polled by Thomson Financial were expecting a loss of 19 cents per share on $173m revenues.

For the year Sirius’ revenues were up 163 per cent to $637.2m, driven by an 82 per cent rise in subscribers. Net losses fell $54.4m to $513.1m.

However, programming and content costs increased 233 per cent last year to $230.2m, as the high cost of bringing in new talent and gaining the rights to sports events took its toll.

Sirius signed ‘shock jock’ Howard Stern on a $500m pay package just over a year ago. In January it awarded him an $83m bonus, even though the company’s share price has halved since he came on board.

Last week Sirius announced that it had agreed to merge with XM, its only satellite radio competitor. XM on Monday also reported a smaller fourth-quarter loss.

Neither company has reached profit and the two companies have pointed to their struggles to create profitable businesses as justification for a merger, even though the Federal Communications Commission, which reviews mergers, specifically forbids it.

This week the two companies will appear before a Congressional committee in Washington to make the case for the merger. Both the FCC and the US Justice Department are required to approve the merger.

Mel Karmazin, Sirius chief executive, said in a call with analysts that he would “outline very much why this [merger] is in the public interest” and “the overwhelming benefit for consumers” when he met with members of Congress on Wednesday.

The companies plan to argue that the growing number of ways that consumers can access music and information – through iPods and other music players, the internet, digital radio and mobile phones, as well as conventional radio - has undercut the young satellite radio business. They suggest that the growth of competition means that only by joining forces can satellite radio survive.

“You’ve seen our losses this year, and seen what XM’s losses were. You’re dealing with companies that ... are losing hundreds of millions of dollars a year,” Mr Karmazin said, arguing for the necessity of a merger.

Analysts have suggested that a merged company could deliver $5bn in cost savings, pushing the joint entity into the black.

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